Monday, September 23, 2013

Forgiveness vs. Discharge

Two terms that are used with student loans are the terms 'forgiveness' and 'discharge'. In either case, you can be released from your obligation (in part or in whole) to repay your student loan if your loan is forgiven or discharged. But what's the difference between the two? It depends on what you do or what happens to you.

For discharging your student loan, it has to be a circumstance that was not your choice. Two common ways of discharging a loan is if you are considered 'total and permanent disability' and 'death'. In these two circumstances, it obviously not be your choice to be totally and permanently disabled or to die. Since you are not able to use your education in the strictest way, you may have your loans discharged. Another way to get your loans discharged may occur if your schools closes before you are able to complete your educational program. The key is 'before you complete your program' though. This is a rare scenario, and neither of the previous two are good situations either.

For forgiving your student loan, it has to be a circumstance in which you made a choice to devote your time to something in exchange for part or all of your student loans. Usually, the forgiving party in this case is the government. For high demand, important jobs such as teaching, public service, or government work, the federal government may actually forgive part or all of your student loans depending on the job and length of service. Some organizations and state governments will do this as well.

Although these are options available, most students won't or aren't able to give back to the community in the specified ways that qualify for student loan forgiveness. And although student loan discharge is available for those who can't physically complete the work their education prepared them for, they are only options in the extreme cases. The most common method of handling student loans is repaying them. With several repayment options available (and some even acting almost like forgiveness programs themselves), it's recommended that you go into repayment with a plan. If you have trouble with any aspect of repayment, talk to your loan servicer for more information.

Monday, September 16, 2013

10 Things You Should Know as a Student Loan Borrower

As a student loan borrower, there are some things you are expected to know and understand. Here are ten things you should know as a loan borrower.

1. Borrow as little as possible.
Sometimes people forget that they will owe loans back with interest. The less you have borrowed, the less you owe back. Seems common sense, but sometimes people forget how much they borrow, and they get into financial trouble when they graduate. Always use loans as a last resort, and if you don't absolutely need to borrow loans, then don't.

2. Have a financial plan while you're in school.
Don't wait, start now! It's a good idea to know how much your schooling will cost. Map out how much gas you'll use going to school, school activities, etc. Go here for some helpful tools on how to do this.

3. Create and follow a budget.
Don't wait on this either! This will be critical when you graduate. You will need to pay attention to how you spend your money because you will likely owe back loans. For help with budgets and some helpful tools, go here.

4. Understand your loans.
If you don't understand what kinds of loans you have, you won't be able to deal with them very well. You should know what types of loans you have (subsidized or unsubsidized, federal or private) and how your interest works (fixed rate or variable rate).

5. Know your loan servicer.
You should know who is servicing your loan in case you have any issues and need to contact them. The easiest way to find out is to go to the NSLDS website. (You will need your FAFSA PIN to access your information.)

6. Setup an online account with your servicer.
This is a good idea because you will be able to receive messages from your servicer quickly. Also, you will be able to keep your contact information up to date and communicate with them easily.

7. Make payments while in school.
Even if it's only $5 a month, it will help. You will be keeping your principal/interest lower which will save you money in the future. If you skip one coffee a month or five song downloads a month, that can add up over the length of a program.

8. Understand there are other repayment plans.
If you are having trouble making payments on your loans, look into maybe switching to a different repayment plan. Servicers won't suggest you try a different one; you will have to ask. You may qualify for a different plan that fits your situation better. Don't be afraid to ask.

9. Repayment is easier when your overall debt is lower.
Try to avoid credit cards and large items that require installment payments. This is helpful for when you go into repayment because then you have less to worry about paying back. It's better to just worry about rent/utilities and your student loan payment, rather than rent/utilities, car payment, the big screen TV, credit card debt, vacation, and student loan payment.

10. Keep in touch.
Don't be a stranger when you have issues! Call someone and ask questions. Your best option is to call the servicer directly. If you don't have their number, the NSLDS website will provide a contact number to call. Nobody can help if they you don't ask for help.

Another friendly post from your friends at Metro Business College!

Monday, September 2, 2013

What Does 'SULA Eligible' Mean?

If you've looked on your NSLDS and you're a new student, you will probably have seen the phrase 'SULA ELIGIBLE'. But what is SULA? And how are you eligible?

SULA is another wonderful acronym that stands for 'Subsidized Usage Limit Applies'. This is in reference to the Dept of Ed's new 150% rule for Subsidized loans. For any new student who had no prior student loan indebtedness on July 1, then you will fall into this category. If you had no loan indebtedness, then you will be tracked by the Dept of Ed for as long as you are enrolled to make sure you complete your program in 150% of the published length of the program. If you do not complete in this timeframe, then you will lose the interest subsidies on your Subsidized loan and your interest will accrue as though it were an Unsubsidized loan.

Since this only affects students with no prior student loan indebtedness on July 1, students with prior student loan indebtedness won't be tracked. If in the future you pay off your loans completely, then return to school, then you will be tracked.

So, being SULA eligible doesn't mean you are eligible for anything cool or helpful: it just means you are being tracked to make sure you complete in 150% of the normal length of the program. And really, for your own benefit, you should complete in that timeframe. If you are fulltime the entire time, and you go beyond the 150%, then you aren't meeting Satisfactory Academic Progress. Also, financially, if you lose your interest subsidies, then you are only hurting your pocket and will be owing money that you could've avoided had you completed earlier.

Another friendly post from your friends at Metro Business College!